ATA Airlines and its parent company ATA Holdings Corp. will end their federal bankruptcy protection by Feb. 28, ending 14 months of the carrier slashing routes and cutting its labor force by half to save money.
The revamped airline will use about half the jets it had when it filed for Chapter 11 protection in October 2004 and focus on flying to travel destinations as part of expanded service. About half the carrier's business will come from military charters.
"We're not nearly concerned about size as we are about being profitable," ATA chief executive John Denison said Tuesday. "We have to go foxhole by foxhole, looking at the way we do business and making changes as we think are required. We're not done with that process. It'll continue on forever."
U.S. Bankruptcy Court Judge Basil H. Lorch III on Monday approved ATA's reorganization plan, which cleared the way for the airline to set its Chapter 11 exit date. Final paperwork confirming the judge's order was filed Tuesday.
The Indianapolis-based airline will continue to depend on a partnership with Southwest that allows passengers to buy one ticket and fly on either airline on certain routes. Analysts said without that code-sharing agreement, ATA might not be able to remain solvent.
"I think the key to their survival is that agreement with Southwest," said Jeffery Miller, a travel industry attorney in Columbia, Md. "The more and more they have a code-share with Southwest, the more it'll make it work."
ATA's hub is at Chicago's Midway airport.
As part of the restructuring plan, private equity fund MatlinPatterson Global Opportunities Partners II will provide $120 million in debtor-in-possession financing as part of the plan.
During the first 11 months of 2005, ATA lost $75.7 million on revenue of $1.02 billion. In November, the carrier had nearly $427 million in assets and $1.5 billion in debt, according to filings with the U.S. Securities and Exchange Commission.
The end of bankruptcy protection will mean little day-to-day change for passengers, Denison said.
Last week, ATA announced it was expanding service to four cities and adding more flights to Hawaii. But dramatic route changes might take time, Denison said.
"We won't grow substantially beyond what we've announced in 2006," he said.
Michael Boyd, president of The Boyd Group, an Evergreen, Colo.-based aviation industry consulting firm, said focusing on vacation travel might strengthen the carrier and help it cater to passengers who want good deals.
"I don't see any clouds on their horizon," he said. "It looks like they've done a solid job and they should last."
More than 400 creditors, representing about $817.6 million, approved the airline's new business plan. Only 72 creditors, representing $22 million, opposed the restructuring.
Among supporters was the federal Air Transportation Stabilization Board, which lent the carrier $110 million.
The board has worked with the airline and court through bankruptcy, said Sean Kevelighan, a spokesman for the U.S. Department of Treasury, which oversees the board. The agency will continue "to protect the taxpayers' interest," he said.
Rusty Ayers, a spokesman for the Airline Pilots Association, the union representing 800 ATA pilots and flight engineers, said he hopes the reorganized airline can weather financial hurdles including the rising cost of jet fuel.
"We hope that management is planning for the worst case so that they're not taken by surprise if things go badly," he said.
ATA was founded in 1973, flying charter trips to leisure destinations. After becoming a passenger carrier in the 1980s, the airline grew to be the nation's 10th largest before filing for bankruptcy to seek protection from more than 1,000 creditors.
Throughout its restructuring, ATA has slashed routes and discontinued service to nearly a dozen cities. In November, executives announced the carrier was ending service to its home city in Indianapolis.
News stories provided by third parties are not edited by "Site Publication" staff. For suggestions and comments, please click the Contact link at the bottom of this page.
